The refugee crisis is killing Britain's chances of staying within the EU

An
Afghan migrant cries as she disembarks an overcrowded dinghy at a
beach after crossing part of the Aegean Sea from Turkey to the
Greek island of Lesbos September 23, 2015.Reuters

Europe faced a
huge influx of refugees this year from Syria and other Middle
Eastern and African nations. Next year will see roughly the same
amount, 700,000 migrants, reach Europe's shores.

This is why Prime Minister David Cameron needs to hold the
referendum on whether Britain should stay or leave the European
Union sooner rather than later if he wants to prevent a Brexit,
says HSBC. The more migrants arrive in Britain, the more it
drives anti-EU sentiment. Cameron wants limits on migrants but EU
membership rules allow unlimited migration within Europe's
borders. So Cameron wants to negotiate the terms of Britain's EU
membership to limit migration if Britain stays in. But the longer
he waits to hold the EU vote, the more migrants arrive, and the
greater the groundswell against the EU within Britain
grows.

So far, Cameron's Conservative government has not given an exact
date for the referendum, but it was promised to be before the end
of 2017.

Liz Martins, an economist at HSBC, released a huge note this
morning looking at the likelihood of Britain leaving the EU and
she says the immigration crisis is the central issue:

"It is hard to gauge the long-term impact of the Summer 2015
migration crisis on sentiment in the UK," said Martins in her
note. "While surveys suggest the images of the crisis did result
in an immediate upswing in support for inward migration for those
seeking asylum from Syria, it has also coincided with the
increased support for Brexit in the polls."

Here's the chart:

HSBC

In other words, people felt sorry for refugees trying to make
their way to Europe but behind closed doors they still don't want
an increase in asylum seekers coming to Britain. In fact, it
boosted support to leave the EU.

HSBC pointed out that a Survation poll commissioned by the Mail
on Sunday, published on September 6, revealed that support for
Brexit has a 51% lead. More tellingly, "of those who wanted to
stay, 22% said they might change their minds if the migrant and
refugee crisis deepened."

"The FT has also reported that the government is concerned about
another potential migration crisis next summer," said Martins at
HSBC. "Applications for asylum have tended to spike in the summer
months in recent years, due to the weather conditions for
crossing the Mediterranean. From this perspective, the government
may believe that having the referendum in April or June rather
than September could make a tangible difference to the outcome."

Don't forget, this is on top of migrants with a non-refugee
status, moving in from Europe or overseas.

To drive home the point even more about Cameron having to hold
the referendum sooner rather than later, HSBC says that the only
other way to keep people on the side of staying within the
EU is by negotiating a "new deal."

The refugee crisis is creating a huge political hot potato and
with Germany welcoming in 800,000 refugees this year alone, it is
unlikely for Cameron to negotiate anything related to the Freedom
of Movement rules in the EU or quotas for asylum seekers.

German
Chancellor Angela Merkel, in the picture being held up by a
refugee, promised to take on 800,000 migrants this year
alone.REUTERS/Michael
Dalder

"Migration is a key issue for many supporters of Brexit, and
here, Mr Cameron's room for manoeuvre is limited," said Martins
in her HSBC note.

"In November 2014, German Chancellor Angela Merkel told Mr
Cameron that he was approaching a 'point of no return' with his
demands for quotas on migration, and indicated that she would
prefer to see Britain leave the EU than compromise the
fundamental principle of freedom of movement."

"So any changes on this issue are likely to be on the benefits
migrants are entitled to on arrival, not to the number of
arrivals per se. We remain of the view that the UK doesn’t have
to leave the EU for the referendum to have a damaging impact on
investor confidence in the run-up.

"This is at the heart of Prime Minister David Cameron's dilemma:
he has promised to hold the referendum by the end of the first
half of this parliament – i.e. by end-2017. The sooner it is
held, the shorter the period of potentially damaging uncertainty
before the result of the vote is known."